Godrej Consumer Products Ltd

Overview

FY 2011 started on an encouraging note as the Indian economy continued to displayremarkable resilience to the lingering effects of the global recession in 2008-2009. Withestimated growth at 8.5%, the India growth story continued to outpace most othereconomies. The developed economies are only now beginning to turn around and demonstraterecovery. This outperformance was partly due to a consistent contribution from theservices sector but largely driven by a “rebound in agriculture and continuedmomentum in manufacturing.” (State of the Economy and Prospects. Chapter 1. p.1)

In terms of domestic demand, a rise in savings and investment coupled with increasedprivate consumption provide a critical component to the Indian growth story, contributingsignificantly towards GDP growth. However, higher interest rates and the disconcertinglyhigh levels of inflation at the beginning of 2011 threatened to severely hamper the GDPgrowth. While a large part of the effects were contained by “the sequenced andgradual withdrawal of monetary accommodation.” (State of the Economy and Prospects.Chapter 1. p.10) inflation still remains an area of concern for policymakers.

The net inflows of FDI have remained disconcerting. From over USD 25 billion inApril-November 2009, net inward FDI slowed down to USD 19 billion year-on-year. Accordingto Moody’s, India’s local currency rating may be upgraded provided that theGovernment meets the medium term fiscal targets. The Union Budget 2011 underlined theGovernment’s efforts to manage the fiscal deficit and it is expected that theseactions “will sustain a faster de-leveraging of government debt than originallyforecast and is credit positive for the Indian government.” (Moody’s WeeklyCredit Outlook. 7 March 2011. p.34)

The outlook for the FMCG sector remains mixed with rising input costs and inflationcreating their own pressures.

FMCG Companies continue to pursue expansion into Rural India. The sector is one of thecountry’s fastest growing sectors as the population’s nominal income rises andtheir purchasing power parity increases. An analysis carried out by the AssociatedChambers of Commerce and Industry in India (ASSOCHAM) shows that the FMCG sector willwitness “more than 50% growth in rural and semi-urban segments by 2012, which intotality is projected to grow at a CAGR of 10% to Rs. 106,300 crore from Rs. 87,900crore.” Mr. Dilip Modi, President of ASSOCHAM, commenting on the analysis, stated,“With 150 million households, the rural population is nearly three times the urbanpopulation. No FMCG company can afford to miss the opportunity.”

The recent Budget announcements have been largely neutral to the FMCG sector andespecially GCPL. The reduction in surcharge from 7.5% to 5% coupled with a hike in thebase MAT rate will keep the effective rate virtually the same. These actions prepare thepathway for the implementation of the GST.

Today, your Company has established itself as one of the leading companies in the FMCGsector, with a memorable brand name and a strong presence in the Personal and HouseholdCare businesses. For the year under review, your Company continued its strong momentum andbuilt on its initiatives of the last few years to consolidate business growth. Throughoutthe year, your Company has seen its brand outreach grow through the implementation of newinitiatives focused on expansion, particularly in the rural space. In addition, yourCompany continues to advance outward, expanding its global reach to diverse regions aroundthe world, and its international business has performed significantly well given the tougheconomic conditions within which that they had to operate.

The edifice of your Company’s approach remains the 3 x 3 strategy, and as aresult, FY 2011 has been a transformative year. The main emphasis of the strategy is toenhance its domestic and international presence and create a multinational business drivenby growth in three categories “Hair Care, Home Care, and Personal Wash” acrossthree regions of Africa, Latin America and Asia. As the global macroeconomic environmentimproves and its acquisitions continue to add value to growth across these diversegeographies, your Company’s operations continue to improve substantially and itsproducts become available to a broader spectrum of consumers.

Apart from healthy organic growth there were also a few developments on the inorganicfront. Your Company acquired the remaining stake in Godrej Sara Lee Ltd. (GSLL), the jointventure with Saralee Corporation USA. The acquisition was renamed as Godrej HouseholdProducts Limited (GHPL) and the resulting merger serves as an important milestone towardsits development as a leading FMCG Company in India. The merger will enhance its focus onthe 3 by 3 strategy and provide significant strategic and operational benefits.

Towards the second half of FY 11 your Company, acquired two brands, Genteel andSwastik, owned by Essence Consumer Care Products Pvt. Limited (EC) and Naturesse ConsumerCare Products Pvt. Limited (NC) respectively. This acquisition will continue to strengthenthe Company’s commitment to India being one of the key drivers of revenues andprofits. The acquisition extends our leadership presence specifically in the liquiddetergents category and reaffirms its position as a domestic leader in the Personal Washcategory.

The hair care portfolio has seen considerable developments throughout the fiscal year.GCPL has maintained its market leadership position in Hair colour with 29% of the domesticmarket share throughout the fiscal year. Nupur continued to gain strong market share andnow appears along with Godrej Expert amongst the top 5 brands in Hair colour category.

GCPL Standalone

During the year under review, your Company relaunched Godrej No. 1, which hasstrengthened its branding and the visibility of the soaps business. Cinthol continued toperform well led by its premium offering in Southern part of the country. In the thirdquarter of the financial year, your Company relaunched FairGlow soap, specializing infairness. For the year, your Company maintained a market share of 10 % in the PersonalWash category.

In the household insecticides business, Goodknight Advanced Low Smoke Coil was voted‘Product of the Year 2010’ in the Insect Repellent category, making it thesecond consecutive Goodknight win followed by Goodknight Naturals Mosquito repellent creambeing voted ‘Product of the Year 2011’. HIT Aerosols have grown at healthy rateson the back of 360 degree activation drive awareness for the ‘Kill Malaria’campaign. Under Goodknight franchise coils, electrics and naturals cream continue tooutperform the category on the back of innovative products and successful marketinginitiatives.

International operations have also performed robustly despite tough macroeconomicchallenges globally. In Latin America, following GCPL’s announcement of theacquisition of the Issue Group, your Company went on to acquire Argencos, a mid-sizedArgentine hair company. In Q3 of the current financial year, your Company operationallymerged both to create a consolidated business in Latin America, improving strategic reachand operational performance. In Africa, businesses continue to demonstrate strong growthas Rapidol continues to enjoy its market leadership in ethnic hair colour in South Africa.Your Company also launched its first Kinky ‘Store within a Store’ concept andestablished a hub in Nairobi. GCPL also completed the acquisition of Tura in the beginningof the fiscal year. Megasari continues to enjoy its number two position in householdinsecticides in Indonesia.

Domestic Business

Personal Wash

GCPL has retained its position as the second largest toilet soaps player in India witha market share of over 10%, aided by strong initiatives on the marketing and distributionfront.

Godrej No. 1 is built on the proposition of natural beauty and is our leading brand insoaps. During the year, we relaunched it with a new shape and packaging and strengthenedthe promise of ‘nature’s way to beauty’ with addition of natural oils. Theenhanced product substantiates our promise to deliver premium value at an accessibleprice. We have a range of variants comprising Sandal and Turmeric, Lime and Aloe Vera,Jasmine and Coconut and Neem. The latest addition to the range is Saffron and Milk Cream.With this variant, Godrej No. 1 is offering its consumers the benefits of Saffron apremium natural ingredient.

Godrej No. 1 maintained its leadership position in the North with a dominant positionin the states of Punjab, Haryana, UP, Uttaranchal. We have also significantly increasedour share in rural India through several initiatives launched over the year.

FairGlow, which is a fairness specialist soap, was in fact the first of its kind inIndia. It addresses the needs of a large section of consumers who drive the market forfairness products. It was also relaunched during the year with attractive new packagingand shape and the promise of fairness was strengthened with the addition of ‘Fairness+ Proteins’.

Cinthol, our other legendary brand is all about active, re-energising freshness andcontinues to perform well. We enjoy a stronghold in the southern states of Tamil Nadu andAndhra Pradesh, which complements our strength in North India with the Godrej No. 1 brand.Extending Cinthol soaps to lower unit price packs in the South has helped make the brandmore accessible, while significantly increasing brand penetration. The expectedimprovements in disposable incomes, as a result of higher expected rural incomes andmoderation in food price inflation, should boost stronger growth in rural markets. We willcontinue to ramp up our sales and distribution network to address these arising growthtrends and are confident that our enhanced product portfolio will help drive growth.

Cinthol talcum powder continues to grow strongly and ahead of the market. It isavailable in five perfumed variants Sport, Classic, Cologne, Musk and Lime. Cintholdeodorant continues to strengthen its presence through a range of six variants Sport,Cologne, Classic, Musk, Unleash and Rainstorm. We anticipate healthy growth from thiscategory, owing to the increased product range and the enhanced distribution base.

Godrej Protekt marked our foray into the health and hygiene category and promises the‘freedom to touch’ through a range of hand sanitisers, hand wash and hand wipesin three fragrances Original, Blossom and Citrus.

Hair Care

We continue to take strong strides in the hair colour business and enjoy marketleadership in the domestic hair colour market. In the last year, we have witnessed astrong growth in off takes and have maintained a market share of 29%. This strong salesgrowth has been supplemented by successful marketing initiatives to improve market reach.

Our Hair Care category is led by Godrej Expert Powder Hair Dye, which is India’sbiggest name in hair colour. We have experimented with different offerings, both in formatand colours to build on this position. Godrej Expert announced the re-launch of its brandto make its 4 crore consumer base happy and invites more people to colour their hair.Nupur, our leading mehendi brand adds to the natural aspect of this portfolio. We alsohave Kesh Kala Oil, Kali Mehendi and Anoop. While these products have mass appeal and arewidely used across the country, we also cater to a more premium category through Renew andColoursoft, our hair colour brands and are well placed to build our market share in thefast growing hair colour market in India.

Home Care

The Home Care bracket includes the iconic Goodknight brand with its interestingproposition built on ‘protecting happy moments’, which leads the HouseholdInsecticides category in India. The Goodknight Advanced Range comprises three products,the first of which, Goodknight Active Plus was voted ‘Product of the Year’ in2009 in the Household Insecticide category. Goodknight Advanced Low Smoke Coil is theworld’s first low smoke coil that emits 80% less smoke while being 25% moreeffective. Goodknight Naturals, our innovative tryst in this category is a great exampleof how we are constantly looking to evolve better consumer offerings. It is currently theonly mosquito repellent with moisturizing and skin care benefits and comes in 50 ml and125 ml packs. The Goodknight Care range includes the 75% market share, Goodknight SilverMats. This product has been a pioneer in mats and currently comes in packages of 30 matsand 100 mats. Goodknight coils are the only coils with a special fragrance and they arethe largest selling 12 hour coils in the Indian market. Goodknight also remains thefastest growing refills brand.

Hit is our other key brand which completes the cycle of building a happy and safe home.It is the undisputed leader in the fast growing aerosol format and we were able to drivefurther growth through enhanced visibility and focused marketing initiatives. Jet, a starregional player brand, has over 70% market share in the coil category in Andhra Pradesh.

Our liquid detergents business has performed very well. Ezee is India’s leadingliquid detergent brand and with our acquisition of the Genteel brand, we have extended ourleadership in the Specialty Liquid Detergents category in India. Genteel has a 12% marketshare, largely in South India and the acquisition takes our share in the liquid wool washcategory close to 90%.

Distribution and Supply Chain

Our integrated supply chain and the newly institutionalized global supply organizationallows us to be an industry benchmark in end to end replenishment and TOC. We are buildingcenters of excellence in TPM, lean, six sigma and low cost automation to augment ourbusiness. Debottlenecking initiatives in the last year have resulted in an additional 20%capacity created in coils, aerosols, soap making and finishing. Strategic sourcing of noncommodity raw and packaging materials will play a distinguishing role ahead. We expectsignificant resultant cost efficiencies to show in the coming years. For example, theacquisition of Megasari in Indonesia has contributed to enhanced scale and consequently,accessing inputs and packaging material at competitive rates. It has also widened ourvendor base.

On the distribution front, the merger of GHPL with GCPL has contributed significantlyto expanding our presence, especially in rural areas. The increase in number of touchpoints has been a key contributor to growth during the year. We enhanced our villagecoverage with about 8,000 additional villages during the year.

Human Resources

This transformative year has been defined by the creation of One GCPL. All HRprocesses, structures were successfully integrated across our combined business.

We continued our commitment to being an employer of choice and ranked 14 overall in theGreat Places to Work Survey conducted by Great Place to Work Institute in association withEconomic Times, and number 1 in the FMCG industry. We were also ranked the number 4 BestEmployer in India by Aon Hewitt.

Our initiatives in leadership development and learning were further strengthened by theleadership series, launched this year in partnership with faculty from leading businessschools from across the globe. This is a three part series with modules on leading self,leading others and leading business. We introduced the Godrej Sales Academy which focuseson strengthening sales capability in the organization and also launched ‘ShiftingGears’, an initiative for the assessment and development of members of the supplychain and manufacturing teams.

We are continuously building for a brighter workplace ‘JLT Just Like That’continues to be a great forum to interact, as is the new ‘Monday Mania’ whichkeeps up the fun and beats the Monday blues. We also launched the first employee magazine,‘Connect’, which provides a platform for interaction and information sharing.

We have also been working on integrating and extending some of our best practices toour international subsidiaries. In the year gone by, we integrated four new companies fromthe three geographies of Indonesia, Nigeria and Argentina. Our manpower numbers incountries outside India has risen significantly and now comprises over 40 percent of ourtotal workforce. A dedicated HR team has been set up in India to support the integrationof new businesses and institutionalize critical HR processes such as performancemanagement and employee engagement. We will continue to strengthen our commitment towardsmaking our international subsidiaries great places to work at.

Information Technology

During this fiscal year, we have undertaken important IT initiatives to improvecustomer services, employee productivity and controls and cost optimization. The SAPintegration project will help us to harmonize processes and reduce the cost of operationin supply chain, as well as improving controls. Going forward, we plan to implement SAP inall subsidiary units and integrate them into one SAP ERP system.

Our Business Intelligence Project which was also introduced this year, will providesignificant benefits in improving information availability, analytics and the decisionmaking processes. We have launched a Sales Force Automation initiative (providing handheldinstruments to the distributor sales force) to provide high quality services to our retailcustomers. This initiative has been rolled out in 8 cities in India, the results areextremely encouraging and we will extend this to other cities in the coming year.

Research and Development

Our Research and Development (R & D) focus is to drive innovation in all areas ofour business, resulting in improvements in product quality, cost savings, higherefficiencies and improvements in packaging. We have integrated our R&D practices tooperate in tandem with all our businesses and various product categories.

We leverage R & D activities to keep abreast of changing consumer tastes. Thisincludes consumer studies to gauge feedback on new products, modifying products to suitconsumer tastes and adding features and variants to existing products to providealternative solutions to our consumers.

In the last year, we have launched several products with benefits and features whichhave been formulated by in-house R & D activities. For example, in the Personal Washbusiness, we launched a new variant of Godrej No. 1, Saffron and Milk Cream and relaunchedFairGlow. We believe after considerable research that consumers are evolving and need morethan just a hair colour. The re-launch of Godrej Expert delivers the most sought afterbenefits; long lasting colour, range of shades and the promise of soft and strong andhappy hair!

We have also been working closely with the international businesses to cross sellproducts by modifying them to suit consumer tastes in different geographies. In Hair Care,there have been several international launches, including 10 new shades in Renew haircolour, 3 new shades in Inecto powder hair colour in South Africa and the launch of AbhaHerbal Black Henna in Sri Lanka. The support to our South African business has led to costsynergies and in fact, at Rapidol, we have worked on minor adjustments to products torenew exports to African countries where we have an enhanced presence through recentacquisitions.

We have used feedback from our R & D team to improve packaging of products throughenhanced safety and improved imagery. It has also helped us modify the aesthetics of ourproducts and explore potential areas that can be outsourced, leading to lower costs andimproved efficiencies.

International Businesses

Our business extends to over 60 countries, including Sudan, SAARC countries, EuropeanUnion, South East Asia, Fiji, Nepal, UAE, Bangladesh, Thailand, Singapore, South Africa,Mauritius, Latin America, Indonesia and Nigeria to name a few.

We continue to strengthen our presence in the countries through mergers andacquisitions, creating new market initiatives and expanding our market share in existingcategories.

Indonesia

We have acquired the PT. Megasari Makmur Group in Indonesia. The Megasari Groupmanufactures and distributes a wide range of household products, including householdinsecticides, wet tissues and air fresheners. The business continues to do well and enjoysa number 2 position in the household insecticides market in Indonesia. It is also a leaderin the baby wipes markets. We are confident this business will continue to produce valuethrough its leading positions in insecticides, air fresheners and baby tissues.Integration plans for this acquisition are well on schedule and we look forward to itplaying a key role in our global portfolio.

Africa

Our Africa business comprises three companies, Rapidol, Kinky and Tura. Rapidolcontinues to enjoy its position as the market leader in the ethnic hair colour market inSouth Africa. The Inecto colour range continues to do well and its diverse variantsprovide for a broad range of consumers. Rapidol also entered the Caucasian hair colourmarket with Renew from GCPL India. This year however, sales growths were affected byslowing economy and local competition.

Kinky offers a variety of products, including hair, hair braids, hair pieces, wigs, andwefted pieces and hair accessories like styling gels, hair sprays and oil free shampoos.Some of the Kinky products are processed at a plant in South Africa, while cash-n-carryoutlets and owned stores provide avenues for disbursement of products. During the year, welaunched Kinky’s ‘Store within a Store’ concept and set up the hub inNairobi, Kenya.

As part of our strategy to integrate operations and improve production efficiency, wehave combined the operations of Rapidol and Kinky. We have increased the number of storesto 29 and overall presence through the combined operation.

The acquisition of Tura in Nigeria was completed this fiscal year. Tura is a householdname in African markets and as a leading personal care company, enriches our portfoliohandsomely by providing a range of products including soaps, moisturising lotions, andskin-toning creams. Their medicated bar soap is among the top three products in Nigeriafor the soaps category.

Overall, we are pleased with our presence in the African markets. We will look toconsolidate these operations by synergizing functions and then seek growth by crossselling products between different global operations.

Latin America

We entered the Latin American market this year with the acquisition of two businesses:Issue and Argencos. We also merged the two businesses operationally to provide strategicand operational benefits. The acquisition of Argencos, a mid-sized Argentine hair carecompany focusing on hair colours, complements the Issue portfolio, a company that hasstrong presence in the mass category. We believe the combination of the two businesseswill provide a firm footing and strong entrance into South American markets, particularlyin Argentina, Uruguay, Paraguay, Bolivia and a very good participation in Peru, Ecuadorand Chile.

We also expect significant synergies across the value chain and predict a strong thrustfor a sizeable business in Brazil. The strategy is based on the time-tested method ofdeveloping international business through the acquisition of local brands. The haircolourants market in Argentina is estimated to be around USD 200 million growing at CAGRof 22% over the last two-three years. Argencos is the number 1 hair spray company involume terms the brand Roby has immense brand equity in Argentina. Subsequently, theGodrej hair colour portfolio will now enjoy a volume market share greater than 25% in haircolours and over 50% in hair styling sprays.

United Kingdom

Keyline Brands in the UK owns brands like Cuticura, the lead volume hand sanitizer inthe UK market, and Provoke Touch of Silver which has doubled turnover in the three yearssince acquisition. In addition to this, Keyline distributes market leading skincare andsuncare brands like Bio Oil and Reimann P20. The base effect of H1N1 (swine flu) epidemichas impacted and led to a decline in sales in the current fiscal year. There have alsobeen exceptional onetime costs, like those associated with outsourcing warehouse anddistribution, which have impacted profits in the year but will bring significant benefitsgoing forward. During the year Keyline Brands acquired the worldwide trademarks (exceptNorth America) of the brand Salon Selectives. We believe that Salon Selectives hasoutstanding potential in both the UK and global markets. This great business opportunitycomes from the strength of the unique brand proposition, the success of the brand globallyin the 90’s, and immediate success of its recent introduction.

Middle East

Godrej Global Mideast FZE (GGME) continues to distribute soaps, hair colours, andtoiletries in the UAE and other GCC countries. The products launched in the Middle Eastinclude Godrej Expert hair colour and Godrej Nupur Mehendi.

Corporate Social Responsibility

The Godrej Group has been at the forefront of philanthropic and social activities forseveral decades. 25% of the shares of the Godrej Group’s holding company Godrej &Boyce are held in a trust that invests back in initiatives that support the environment,and improve the quality and availability of healthcare and education. Through theinvestment and oversight by the trust, a large tract of mangrove forests in Mumbai havebeen protected, developed and maintained for several years and have served as a second setof lungs for the city. The Godrej Group has supported education for all through itssupport of the Udayachal pre-primary and primary schools which focus on all rounddevelopment of children.

Additionally, the Godrej Group has supported initiatives in healthcare, through itsGodrej Memorial Hospital (GMH), which aims to provide quality healthcare at affordablecosts. One such initiative is GMH’s partnership with a US based NGO ‘SmileTrain’ which helps in performing corrective cleft lip and palate surgeries for lowincome children. GMH offers surgery and hospitalization to the patients free of cost.

Through active employee engagement and involvement, the Group continues to support theIndian chapter of “Table for Two”, which it initiated at the World EconomicForum India Summit in December 2009. The initiative is targeted at addressing hunger andmalnutrition in the developing world by combining our organization’s tradition ofserving society and individual involvement.

The Godrej Group also continues to support Heroes AIDS Project (HAP). HAP is nationwideHIV/AIDS initiative launched in July 2004 to work with media organizations and societalleaders in India. It seeks to develop coordinated campaigns to address the spread of HIV/AIDs and reduce stigma and discrimination by influencing public perception and policythrough two platforms, advocacy and communications.

Environmental Initiatives

GCPL is a signatory to the Confederation of Indian Industry’s (CII) Mission ofSustainable Growth, which proposes to promote and champion conservation of naturalresources in Indian industry without compromising on high and accelerated growth. Ourcommitment under the code is to reduce energy and water consumption by 2-6% on an annualbasis, and we have been successful in doing that since signing two years ago. Initiativesundertaken to achieve this have included using more energy efficient motors at ourfactories, converting to LED lights, harvesting rain water, and using soil biotechtechnology to treat effluents for some processes.

GCPL has moved from PVC packaging of its products to the more environmentallysustainable PET packaging. Additionally, we have consciously reduced the plastic contentin our packaging through a re-design process that has covered refill bottles and aerosolcaps. Metal usage has also been decreased by using lower grammage coil stands andmarginally reducing the height of aerosols cans. In several of our units we have alsoswitched from furnace oil to natural gas or agro waste in order to reduce the emission ofgreen house gasses. Efforts are underway to extend this to other units as well.

Your Company is also an active participant in the “Green Initiative in CorporateGovernance” recently launched by the Ministry of Corporate Affairs. With a view tocontribute its mite to a sustainable greener environment and conservation of preciousresources, your Company has printed this Annual Report using eco friendly paper.YourCompany has also encouraged shareholders to receive communications from the Company byelectronic mode.

Social Initiatives

HIT undertook a numbers of social initiatives last year to increase awareness abouthousehold hygiene and health.

In August, HIT conducted the ‘Kill Malaria’ campaign, with the objective ofspreading awareness on the causes, symptoms and prevention of deadly mosquito-bornediseases such as Malaria and Dengue. The campaign covered six metros (Mumbai, New Delhi,Kolkata, Chennai, Hyderabad and Bangalore) and reached approximately 5 lakh individuals.

Before Diwali, the festival of lights, HIT launched a cleanup drive for slum dwellersacross the city of Mumbai. In order to gift cleaner surroundings to the less privilegedcitizens over the festive season, HIT squads undertook the “Saaf Ghar, SwachTyohar” campaign which cleaned up the homes for 2200 families.

Inclusiveness

We continue to reinforce our commitment to Affirmative Action. GCPL also recognizes theimportance of diversity in the workplace. As a result, it continues to endeavor to provideopportunities to socially and economically underprivileged persons, including thosebelonging to Scheduled Castes, Scheduled Tribes and other physically challengedindividuals. Recruitment drives for prospective employees from each of the above mentionedcategories were conducted in the last year. We recruited SC and ST candidates for close to31% of the manufacturing vacancies this year. We also provided training, counseling andother facilities to students to help broaden their learning and improve their candidaturefor campus recruitments. We have also partnered with the Ambedkar Institute forhandicapped in Kanpur for recruiting physically challenged individuals and have organizedworkshops at the Institute on industrial practices for skills development. We also createdspecial provisions in purchase orders and vendor agreements to provide an equalopportunity to SC and ST and differently abled people in employment, entrepreneurship etc

In 2007, our Malanpur factory adopted a neighboring village “Singwari”, whichis predominantly inhabited by people belonging to scheduled castes and scheduled tribes.The adoption started with assisting a school by granting scholarships, providingcomputers, and organizing an eye-check up in the school. The focus has continued witheducation and health care support for the village, including running a dispensary withregular doctor visits, free distribution of medicines, and an annual “Health Check-upcamp” with assistance from the Government Block Health Centre. The development andwelfare of Singwari village has become integral to the employees of GCPL Malanpur and theyhave undertaken self motivated initiatives including conducting sports and culturalactivities in the school as well as training teachers on the use of computers. In order topromote the economic status of youth and women in Singwari, the Malanpur factory organizesan annual “Entrepreneur Development Programme” in association with Central Boardfor Workers Education.

Our other factories are also actively involved in improving the quality of life insurrounding communities through initiatives such as educational scholarships forunderprivileged students and health and hygiene awareness drives.

Through a self-funded program - Godrej Rural Internship Program (GRIP), GCPL willstrive to improve livelihoods in several under-developed communities. GRIP, which iscurrently under development, will focus on imparting training to rural Indians enablingthem to work as our channel partners.

Looking forward:

Over the last year, through an even more strategic approach to corporate socialresponsibility, the Godrej Group has evaluated how it can drive more meaningful impact andfurther its commitment to the communities within which it operates through shared valueinitiatives that create both social and business benefits.

In conjunction with our vision for “brighter living” for all itsstakeholders, we have developed a long-term vision for playing an active part in creatinga more inclusive and greener India. This vision has been named “Godrej Good &Green”. As part of Good & Green, the Group aspires by 2020, to create a moreemployable Indian workforce, a greener India and innovate for good and green products.

Specifically, our goals at the Group level for 2020 as part of this vision are:

• Training 1 million rural and urban youth in skilled employment

• Achieving zero waste, carbon neutrality, positive water balance and a 30%renewable energy source

• Having a third of our portfolio revenues comprising and/or green products andservices defined as products that are environmentally superior or addresses a criticalsocial issue (e.g., health, sanitation, disease prevention) for consumers at the bottom ofthe income pyramid

The Good and Green vision and continued execution against that vision will be a strongfocus for the GCPL going forward.

Financials (Consolidated)

Abridged Profit and Loss statement

GCPL’s net sales in FY2010-11 were Rs. 3,643 crore, representing a growth of 78%over FY2009-10.

Profit before Interest, depreciation, tax and exceptional items (PBIDT) increased by57% to Rs. 713.6 crore.

Your Company generated a Profit before tax (PBT) & before exceptional items of Rs.611.8 crore and a Net Profit after tax (PAT) of Rs. 514.7 crore, displaying a 46% and 52%growth respectively over the Company’s FY 2009-10 performance.

Profitability perspective

Internal Control Systems and their Adequacy

Your Company has a proper and adequate system of Internal Controls, to ensure that allassets are safeguarded and protected against loss from unauthorized use or disposition andthat transactions are authorized, recorded and reported correctly.

Your Company’s Corporate Audit and Assurance Dept which is ISO 9001: 2000certified, issues well documented operating procedures and authorities with adequatebuiltin controls at the beginning of any activity and any time during the continuation ofthe process, if there is a major change.

The internal control is supplemented by an extensive programme of internal, externalaudits and periodic review by the management.

The system is designed to adequately ensure that financial and other records arereliable for preparing financial information and other data and for maintainingaccountability of assets.

During the year the Corporate Audit and Assurance Dept was involved in facilitating theSAP implementation so as to ensure that the existing processes are adequately capturedwith in-built control mechanisms.

GCPL Head Office and all major factories & offices across India operate anInformation Security Management System which are ISO/IEC 27001 certified

Awards & Recognitions

• GCPL features among the top 25 best employers in the Outlook Business - HewittStudy

• Goodknight advanced Low smoke coil voted Product of the Year 2010

• Brand Equity’s Most Trusted Brands Survey 2010

o Goodknight continued its fine run registering its highest 12th rank in the survey

o Godrej No. 1 leap-frogged from 103rd position to the 69th rank

o Godrej Expert Powder Hair Colour made its debut in the survey at the 100th postionand also features along with Cinthol and Godrej No. 1 in the most trusted personal carebrand in India survey

o In the city-wise rankings which lists 10 most popular brands in the 5 metros, GodrejNo. 1 has been ranked at the 6th position in Delhi and Cinthol features at the 10th spotin Chennai

• Godrej Expert and Goodknight Advanced Activ+ awarded Bronze medal atEFFIE’s 2010 Awards.

• Godrej Ezee Commercial Features in the ‘Best Ads on TV’ Survey

• Godrej Consumer Products awarded NDTV Profit Business Leadership Award in‘Consumer Product Goods’ category

• Godrej Consumer Products awarded the Pitch Top 50 Marketers 2010 award in the‘Globetrotters’ category

• Goodknight Naturals Mosquito Repellent Cream voted Product of the Year 2011

Risk and Concerns

As your Company expands its global reach, it is exposed to an increasing degree ofrisks. These risks can adversely impact the functioning of the Company through theireffect on operating performance, cash flows, financial performance, management performanceand overall sustainability of the Company. GCPL has in place an active risk managementsystem to identify and mitigate potential risks to the organisation. The risks that mayaffect the functioning of the Company include, but are not limited to:

• Economic conditions

• Inflationary pressures and other factor affecting demand for our products

• Increasing costs of raw material, transport and storage

• Supplier and distributor relationships and retention of distribution channels

• Competitive market conditions and new entrants to the market

• Labour shortages and attrition of key staff

• Exchange rate fluctuation and arbitrage risk

• Integration risks for acquired companies

• Compliance and regulatory pressures including changes to tax laws

• Seasonal Fluctuations

• Political risks associated with unrest and instability in countries where thecompany has a presence or operates

Your Company has a defined risk management strategy and has constituted a RiskCommittee whose role is to identify potential risks, creates mitigation strategies andmonitors the occurrence of risk.

Outlook for FY 2011-2012

Your Company is extremely well positioned to maintain and accelerate its growth. Overthe last 2 years we have put in place several building blocks and create a strongerplatform to support this growth while concurrently successfully combating various externalchallenges. As we go forward we will explore opportunities both organic and inorganic. Wewill look to expand our presence both domestically and internationally primarily inemerging markets and in the home care, personal wash and hair care spaces. There istremendous opportunity in these businesses and your Company is well equipped and ready toleverage this opportunity and establish its position as an Emerging Market FMCGPowerhouse.

Cautionary Statement

Some of the statements in this Management Discussion and Analysis, describing theCompany’s objectives, projections, estimates and expectations may be ‘forwardlooking statements’ within the meaning of applicable laws and regulations. Actualresults may differ from those expressed or implied. Important developments that couldaffect the Company’s operations include a downtrend in the domestic industry,significant changes in political and economic environment in India, tax laws, importduties, litigation and labour relations.